Virginia 2020: Tax-and-Spend on Steroids

by James A. Bacon

Ralph Northam ran for governor as a don’t-rock-the-boat center-left moderate who would continue governance of Virginia in the tradition of his predecessors Terry McAuliffe and Tim Kaine. Virginians bit the bait. Then the blackface scandal happened, and Northam had to do penitence to Virginia’s progressives to survive politically. Subsequently, in what was in part a referendum on an unpopular President Trump, Virginians installed a Democratic Party majority in the General Assembly. I’m not sure Virginians knew what they were getting, but they’re now finding out.

Northam has chosen to govern as a classic tax-and-spend liberal. The Commonwealth’s budget (General Fund and Non General Fund) will have increased from $57 billion as originally submitted in Fiscal 2019 to $68.4 billion by Fiscal 2022, or 20%. That would constitute one of the biggest spending expansions in Virginia fiscal history. (If we adjust for inflation, which is much lower than in the past, it may be the biggest expansion of government in our lifetimes.) Judging from the governor’s State of the Commonwealth address yesterday, there is not a single problem facing Virginia that doesn’t warrant a government solution.

Yet, as much as Northam embraced big government yesterday, his agenda is not as radical as many of his Democratic confreres in the legislature would like. He did not advocate a rollback of the state’s Right to Work law. He believes that corporate investment is a good thing, and that Virginia needs more of it. He did call for a minimum wage increase but did not specify that it had to be $15, as many have called for. Rather than fund every special interest with its hand out, he actually proposes setting aside hundreds of millions of dollars to build the state’s financial reserves to $1.9 billion, enough to safeguard Virginia’s AAA bond rating and provide a financial buffer against a recession.

Here’s a terrifying thought: Given the impotence of General Assembly Republicans, Northam may be the only thing standing between Virginia and a really radical progressive agenda.

Northam’s rhetoric remains moderate in tone. “Capitalism,” he says, “enables more people to live in prosperity than ever.” To many progressives “capitalism” is a dirty word that deserves credit for nothing but racism, sexism, inequality and oppression. “We live at the greatest moment in the greatest state in the greatest country in human history,” he added. By that, I take it, the governor does not embrace the strain of progressive thought as seen in the New York Times 1619 project that regards Virginia and the U.S. as deeply and indelibly stained from their founding by racism and oppression.

The speech also acknowledged that people want a better life, not sweeping institutional change. As he said yesterday, “Virginians want a well-paying job and the chance to get ahead. They want their children to have a world-class education. They want to be healthy. They want to live in a clean environment. They and to be treated fairly, and to participate in our civic life. They want to be safe. And they want an inclusive Virginia, embracing diversity.”

But, despite a decade of economic expansion and record low unemployment, Northam believes that there are many wrongs still to right, and that the answer to every social malady is more money for bigger, better government programs.

While Northam did allude vaguely to higher tobacco and gasoline taxes, at no point did he enumerate the full panoply of tax increases, tax clawbacks, and revenue enhancements that he’s proposing, nor acknowledge how these burdens might make peoples’ lives harder. Big chunks of the spending increases can be attributed to higher charges by colleges and universities as well as federal funding for Medicaid expansion. Some can be attributed to economic growth. How much will come from the citizens in the form of higher taxes and costs cannot be readily deciphered from the budget as submitted. Needless to say, Northam has no motive to tell us. And mainstream journalists show no interest in the subject.

Perhaps my colleague Steve Haner and his friends at the Thomas Jefferson Institute for Public Policy will tot up the tab for taxes, cap-and-trade levies, hospital surcharges for Medicaid, and higher college tuition. Citizens need to know how much they will be coughing up in overt taxes and hidden taxes for Northam’s list of spending initiatives.

Meanwhile, someone needs to ask this question: Will all this extra spending do any good? Will it make one whit of difference in reducing poverty, improving educational outcomes, creating jobs, and improving peoples’s lives? Or do Northam’s spending priorities represent a giant giveaway to left-leaning special interest groups? I’ll be addressing those issues in future posts.

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17 responses to “Virginia 2020: Tax-and-Spend on Steroids

  1. A simple proxy for increased taxes is increased spending. Virginians will be giving 20% more to the government so it can spend 20% more. Reasonably, you can subtract inflation, population growth and real state domestic product growth. That’s 2.1%, 1% and 2.5%. Total = 5.6%. The proglibs in Richmond want a 14.4% tax increase … regardless of what silly names Northam uses to disguise his socialist tendencies.

    When the president gives the state of the union speech there is an immediate recorded rebuttal by a leader of the opposition party. Where are Virginia’s Republicans with their rebuttal?

    • For better or worse, here is the GOP response:

      “If there’s one key takeaway from tonight’s speech, it’s this: Ralph Northam and Virginia Democrats want your taxes to go up. The Governor’s wish list would make a lot of Virginians happy, but it comes at the expense of middle class families who are just now recovering from the Great Recession. Republicans in Washington fought hard to get Virginians a tax cut, and Republicans in Richmond will work hard to ensure Virginians keep that tax cut.”

      https://www.gop.com/statement-on-ralph-northams-state-of-the-commonwealth-speech/

    • Regardless of the legitimacy of the 20% number (see my comment below), Virginians “will not be giving 20% more to the government so it can spend 20% more.” More than half of the increase in appropriations in the proposed budget is for nongeneral appropriations. Much of that is federal money for Medicaid (Virginians would be supporting this with their federal taxes regardless of what was included in the state budget). Another big chunk of the increase would be generated by an increase in the gas tax. Virginians will be paying a lot this, certainly, but so will out-of-state drivers visiting or passing through Virginia.

  2. But you also have to look at what the increased revenues are – because we cannot spend more than we take in.

    And that’s what we do not yet know – apparently.

    We know one increase and that is the money we get from the Feds for the Medicaid expansion – yes from taxes but ironically taxes already paid by Virginians to the Feds.. we get our share back. How much?

    Then how much more in Virginia tax revenues – Dems have chosen to spend it rather than give it back – how much?

    Finally – the big enchilada – how much MORE in taxes will Virginians have to pay to fund the 2020 budget? how much?

    We know at least two –

    1. increased taxes on cigarettes
    2. increased taxes on fuel

    but I have to say – trying to decipher this from the online 2020 Virginia budget seems to be a fools errand.. maybe just this one fool. I would gladly bow down to someone with greater abilities than my own to get the info!

    Perhaps Steve and Dick could shed some light.

    • Larry,
      You are not a fool because you can’t decipher the sources of revenue from the online budget bill. The information is not to be found there. You need to look at several sources. For the revenues, check out Secretary Layne’s presentation to the money committees in December: https://www.finance.virginia.gov/media/governorvirginiagov/secretary-of-finance/pdf/WEB_version-JMC-12_17_19-FINAL-(12_15).pdf.

      For details on new spending, you can to to the budget document on the DPB website (that will also information on revenues):http://publicreports.dpb.virginia.gov/rdPage.aspx?rdReport=BDOC2020_FrontPage

      You can also get copies of the documents provided at the briefing that Steve is now attending. Go to the website off either the House Appropriation Committee (http://hac.virginia.gov/) or the Senate Finance Committee (http://sfc.virginia.gov/).

      • Thanks Dick – the first link was informative but it still does not show
        a line item for revenues we receive from the Feds………

        The DMV / VDOT report actually does show a line item for the
        funds that come from the Feds….

        The second link I’ve been to and even though one can drill down – it still is not very transparent on the specific sources of revenue.

        And I also found this part interesting:

        • Transportation Funding
        – Legislative proposal and details to be announced prior to session
        – Relieves the general fund from paying $61 million in transportation debt service
        – Freed up revenue supports general fund initiatives

        I did not realize that the General Fund paid the debt service for transportation. I thought that was done at the fuel tax level.

  3. Actually 3 – hospital provider tax

  4. I object to the bandying about of the 20 percent increase number. It is misleading and seems to be a scare tactic aimed at alarming the public about the big boogeymen Democrats.

    How is it misleading? First of all, it is a comparison of the appropriations proposed in the initial budget bill of the current biennium, introduced in the 2018 session, with the total appropriations proposed in the currently introduced bill for the upcoming biennium. The standard for comparing budget proposals is to use the appropriations for the second year in the most recently enacted Appropriation Act, rather than reaching back a couple of years. In this case, that would be the appropriations for FY 2020, agreed to by the 2019 session.

    The 20 percent number includes appropriations for four years, 2019-2022. Two years of that span, including the increase in appropriations during those years, is history. Therefore, the budget being introduced would account for only part of that 20 percent, actually a little over half, 12.5 percent.

    The 20 percent number is also misleading because it includes all appropriations, both from the general fund and from nongeneral funds. The proposed general fund total appropriation for the upcoming biennium is 9.0 percent higher than the latest general fund total appropriation for the current fiscal year. For nongeneral funds the increase for the comparable period would be 14.4 percent.

    Using the framework used to produce the 20 percent increase calculation, nongeneral fund appropriations for Medicaid were, by far, the largest component of that increase from the proposals in 2018 to those in 2020. The proposed appropriations for Medicaid increased $8.3 billion, or 36 percent of the total increase of $22.9 billion, from the introduced 2018 budget to the 2020 introduced budget. That is mostly federal money, not supported by state taxes.

    In summary, the implication is that the budget bill introduced by Governor Northam represents a 20 percent increase over current spending. That is not true. It would increase spending, over the next two years, by 12.5 percent over current appropriations.

    The other implication in this current post is that the Governor is proposing all this new spending that will need to be paid for by new taxes, hidden revenue enhancements, etc. That is largely not accurate. The budget is balanced; i.e. the appropriations do not exceed the projected revenue. For the general fund, those revenue forecasts are based on current tax policies. No increase in general fund tax rates (primarily income and sales taxes) would be needed to generate the revenue projected. The nongeneral fund revenue projections do seem to include revenue from three projected tax increases: gas tax, cigarette tax, and tax on games of skill.

    It is easy to complain about increased spending or high taxes. It is much harder to come up with suggestions on where to cut the budget. I have asked on this blog before for such suggestions and all I get is silence. I have already suggested several major cuts—constitutional officers (https://www.baconsrebellion.com/wp/constitutional-officers-the-solutions/), the 599 program (https://www.baconsrebellion.com/wp/a-budget-cut-that-should-be-made/), and the $200 million blank check the Governor provided to the General Assembly (https://www.baconsrebellion.com/wp/merry-christmas-general-assembly/) . Anybody want to add to the list?

    • Yep – and agree… it’s all about fear and loathing now that the Dems are in.

      Kind of lame… but pretty much part of the landscape from Conservatives…

      And yes – there is a level of dishonestly involved when the 20% is brought up but they don’t talk about specifics nor the fact that a substantial amount of the revenues is pass-through Federal money.

  5. Did I mention Democrats? Have I let Republicans off the hook over spending increases in previous years? I don’t think so…..The 20% figure is fair. And it covers two years of growth, apple to apple. Incontrovertible. You are correct that the growth has not been all at once, and much of it took place during the current cycle (FY19 and 20). But that’s why I went back to look at exactly the same grand total on exactly the same summary page in the exact same document offered two years ago – the introduced budget. It’s up 20%.

    I especially love your classic riposte – well, if you don’t like it, it is YOUR job to identify what you’d cut. I put up with that BS from money committee chairs and staff for years, and I’m calling it what it is – BS. I can call and raise you on cuts but I don’t have to. That it just another tactic to distract from the real problem of explosive, uncontrolled spending.

    • You did not mention Democrats, but Jim honed in on Northam and the new GA in his post. The 20 percent covers four years: 2019, 2020, 2021, and 2022. The summary page for appropriations in the budget bill is for the biennium. (I have never known why that table does not break the appropriations down by each year in the biennium, as is done for revenues.) I don’t consider it BS to challenge folks who are upset about budget increases to point to what they would cut. If you are not willing to cut something, you should not be complaining about the size of the budget. Finally, Virginia does not have “uncontrolled” spending. Unlike D.C. and some states, the spending is controlled by the amount of revenues available.

      By the way, how was the briefing?

      • Boring as always. Anne Oman is just as exciting a speaker as Robert was, despite her many other gifts :). If there were fireworks I had left the room.

        Look, I’m not going to drop this. Just to give you a preview, I’ve now looked up five HB 30 enactment clauses: 2010, 2012, 2014, 2016, 2018 and 2020. The growth rates on the bottom line appropriation totals for those five cycles were 12%, 13%,12%,7% and now 20%. Each of those was TWO years apart. The starting point in 2010 was $77B and now we are looking at $139B.

        If you look over the whole period, that’s 80% or 8% per year (the way you want to look at it.) Do that, and the 10% per year I’m pointing to is clearly above the trend line, but you could defend it by saying its not that far out of line. (You could, I won’t.)

        But it is clearly way over the trend line.

        I guess it was the word “explosion” but hey, I want readers. The growth is hardly surprising given since two years ago you’ve had:
        1) the TCJA windfall revenue
        2) the Medicaid expansion
        3) the always-ignored Medicaid provider fee increases
        4) the Wayfair tax on online sales
        and now comes a new budget with:
        1) a gasoline tax increase
        2) a cigarette tax increase
        3) a new tax on “grey” gaming machines
        4) (something else I can’t remember….)

        Hell, with all that 20 percent was inevitable! There will be more! Tax bills are flowing in….

    • simple question – how much of the 20% is the Medicaid Expansion funded 90% by the Feds?

      so no – it’s not “reasonable” to stir the pot but not tell folks what’s actually in the pot!

  6. OK. I think we are getting closer. The budget bills from 2010 through 2020 covered 12 fiscal years: 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2020, 2021, 2022. With an 80% increase in appropriations, that averages out to 6.67% annual increase.

    I am not arguing that the current budget does not propose a significant increase in spending over the current biennium. A 12.5 percent increase is pretty significant. But it is the composition of that increase that is important. Screaming 20 percent gives many folks the impression that the spending supported by general taxes, such as income and sales, is going up that much and so, inevitably, will their taxes. But, of course, that is not the case. The increase is primarily driven by nongeneral funds, primarily Medicaid (federal money and the provider fee) and transportation revenue (admittedly, a tax increase there). And, yes, there is a hefty increase in general fund appropriations, 9 percent over the current biennium. But that increase is based on revenue from existing tax sources and is not dependent on any tax increases or new taxes. Of course, there is a lot of new revenue from recent tax policy decisions, the TCJA windfall and the Wayfair tax, but those are now law. So, the revenue is there. We can argue about how to spend it or not spend it (put it in the rainy day fund, help pay down VRS unfunded obligation, etc), but the money will be coming in, unless taxes are reduced.

  7. The 20% is standard partisan blather…

    Significantly – none of the “alarm” folks actually say how much
    individual income (or other) taxes will increase – and that’s because
    they also choose to not lay out the specifics in revenues.

    You cannot have a reasonable debate on the merits when you play this game of scare mongering…

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